Buying a property in your 20s

The property market has been a more advantageous ground recently than it has been in the past few decades. Especially if you are a millennial, who's news feed keeps you updated on just about everything that goes on in the world, it's not something that has gone unnoticed. This has brought the question of whether to purchase a house or to go on renting to the forefront for a generation that would previously have waited a few years more before asking themselves that.

As South Africans inch closer and closer to international standards when it comes to working remotely and being offered more freedoms when it comes to "going into the office", the possibility of homeownership has garnered the attention of a wider audience. In the past, persons in their 20s rarely had to consider the possibility of homeownership, a concern that would only be contemplated when "real life" began. When you reach 30, the media is filled with information that informs you on just what it is you should have achieved, but the 20s remain somewhat muddled in obscurity. And even these age-biased guides that leave their readers drenched in despondency and despair over a wasted life (or so the media would make you believe) do not account for the unprecedented boom in the buyer's market that has been realised since the start of 2020.

With remote work possibilities abound, the need to relocate for new working opportunities has diminished greatly and mean that young professionals are able to purchase a home while still being able to find their professional path and not feel like they are stuck in a job they have outgrown. Simultaneously, the pandemic has left many people with a constrained sense of wanderlust and dampened the sense of adventure concerning their travel dreams. Where many young professionals waited on purchasing a home in order to see where they would find their feet, they may now have found a way of making the life they want right where they are and are ready to purchase a home at a younger age than their younger selves would have thought to.

The prime interest rate is still at a historical low, offering prospective buyers the opportunity to obtain lower interest rates on their home loans. This, in turn, helps them save on the interest that would have accumulated above and beyond the purchase price over the years. Buyers opting to enter the market at this moment will, unarguably, benefit from this. It is, however, unlikely that the interest rate will stay this low for much longer. The truth is that as the economy regains its strength, the interest rate will increase. It is important that the interest rate should not form the sole foundation of financial feasibility. Prospective buyers should take into account that their bond repayments could increase over time as the interest rate increases.

The bank is offering 100% home loans more frequently than ever before, giving those who are not able to put down a deposit the opportunity to buy a house at a time they would not have been able to do before. While this may seem like a positive development at first glance (and it is positive for the most part), prospective buyers need to understand the long-term benefits of putting down a deposit before they opt for a 100% loan. Not only can higher loan amounts result in higher interest rates, but also in higher monthly repayments. Financially, the monthly burden of a 100% loan is much greater than one on which a deposit was put down. While a larger deposit, such as 20%, is obviously more advantageous, buyers may be surprised at the impact a deposit of as small as 5% can make.

First-time buyers also need to keep in mind that the purchase price and bond repayments are not where the expenses of property ownership end. The additional costs of homeownership may be the biggest factor many new homeowners neglect to consider. People who have only ever rented properties may not be aware of the costs that go into owning and maintaining a property. Home insurance, bond insurance, property rates and taxes, and estate/sectional title levies are a few of the costs that homeowners must work into their budgets each month on top of their bond repayments. And that doesn't even include the costs of routine maintenance and unforeseen repairs - the types of expenses you never had to worry about when you could simply call your estate agent or landlord.

Owning a property is a long-term commitment and FOMO really shouldn't play a part in your decision-making process. The market may be beneficial at the moment, but buyer's regret is not something that should rear its head with a decision of such proportions. So, when the time comes to consider purchasing your first home, keep calm and get the advice of trusted property practitioners to help guide your decision.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your adviser for specific and detailed advice. Errors and omissions excepted (E&OE)